RULES OF ENGAGEMENT: IMPORTANCE OF THE CLIENT CARE LETTER

A recent High Court case has demonstrated the importance for clients of understanding the terms of their professional advisor’s engagement, according to a corporate lawyer. 

“The extent of a professional’s duty depends primarily on the terms and limitations of his retainer, as set out in his engagement letter,” says Philip Round, a partner based at George Green’s Wolverhampton office. “A recent case has illustrated that courts will only imply further duties in exceptional circumstances”.

Mr Round continues, “the case of Denning v Greenhalgh Financial Services Ltd concerned the provision of advice by Alexander Forbes Financial Services to the claimant to make certain transfers of his pension benefits under his employer’s occupational final salary scheme to what turned out to be an unsuitable personal pension plan.  Eight years later, the claimant asked the defendant to provide investment advice regarding his present and future financial requirements. When a claim which Denning attempted to bring against Alexander Forbes turned out to be time barred, he then claimed that the defendant had acted negligently in failing to review the original advice provided by Alexander Forbes.”

According to Mr Round, the claimant cited earlier case law that in certain circumstances a professional may owe a duty to give advice outside the scope of a retainer if, in performing the retainer, the professional discovers information that would lead any competent professional to perceive and advise on a risk. 

“The High Court, however, summarily dismissed the claim. It distinguished the earlier authority on the basis that the matter which the professional should have advised on in that instance was very obviously and closely linked to the subject matter of the retainer.  In this case, however, the defendant had not been instructed to review historical advice to make an irrevocable transfer, which had no real bearing on Denning’s current financial position, and the defendant had not been provided with the full extent of information which he would have needed to advise on the transfer.”

Mr Round concludes, “It is therefore crucial that clients take time to read, understand and discuss with their professionals the precise extent of the instructions as set out in the client care letter.  At George Green, we endeavour to set out in detail the nature and scope of our instructions at the outset of a matter and to provide a realistic fee estimate based on that scope.”